London Office Market Analysis

Estates Gazette has just published in analysis of the London office market in 2017. The main conclusions include:


  • Total central London office take up was 12.6m sq ft (all deals) which was up around 2m sq ft on the 2016 total in a relatively strong year and just above the five year average;


  • The City core saw just under 3.6m sq ft of deals in 2017, together with 1.8m sq ft in the City fringe. Both figures are down on previous years;


  • Lettings in the Midtown, West End and Southbank areas were strongly up by over 40% last year;


  • Lettings of Grade A space were up strongly at 52% of all lettings in 2017, compared to 42% in 2016;


  • Overall, TMT was the most active sector in 2017 as a whole, accounting for more than 27% of all lettings. The five biggest deals in the quarter were from the TMT, Central and Local Government, Property, and Financial sectors. A proportion of small and medium sized occupiers are being absorbed by serviced office space;


  • Some 3.7m sq ft of new office space was started in 2017, but this compares with an average of over 5m sq ft of starts in 2015 and 2016. This means there are lots of speculative completions coming through, which in turn in driving higher take-up;


  • Around 8.3m sq ft of new London office completions are planned for 2018 (a ten year high), with over 6.3m sq ft of completions already planned for 2019;


  • Overall London office availability has risen from 4.3% in 2015 to 7.4% in late 2017, driven by a rise in secondhand space that now stands at 12.4m sq ft;


  • As a result rents overall are edging down, which could encourage more occupiers to relocate;


  • 2018 take-up in central London is likely to be driven by new build deals;


Metropolis forecasts that the rising volume and proportion of new build letting transactions will sustain the fit-out and office equipment supply markets in 2018-19. forecasts a strong pipeline of new schemes (there are over 200 in the pipeline of 20,000 sq ft or more) seeing construction starts in 2018.